Sixth Report on the Implementation of the Telecommunications Regulatory Package

On December 7, 2000, the European Commission published the Sixth Report on the Implementation of the Telecommunications Regulatory Package, divided into three main sections: major developments in the market; the implementation of the key regulatory principles covered by the current framework; and the conclusions related to the attainment of the eEurope objectives set at the European Councils in Lisbon and Feira. The Report was assessed in the Council of Telecommunications Ministers on December 22, 2000.

The overview of the regulatory framework in the Member States provided in the report reflects the situation on October 16, 2000. In order to gather information for the report, the Commission took into consideration the opinions of a wide range of market players: incumbent and new operators at the national and pan-European level, respective industry associations, consumer and user groups, representatives of the national regulatory authorities (NRA) and the relevant ministries. In Portugal, consultation took place with ICP, Portugal Telecom, APRITEL and a significant number of new operators.

Market data was gathered directly from the NRAs, setting out the situation as at August 1, 2000.

The Commission intends to continue to prepare reports of this nature during the transition period towards the new regulatory framework.

The following provides a summary of the key aspects identified by the Commission in this Sixth Report.

A. Market Overview

The key message from the market is that growth continues in the national markets for telecommunications services at an average rate of 9% compared to 1999, and the market is worth an estimated 191 billion of euro in 2000. Penetration rates of mobile services increased from 36% in 1999 to 55% in 2000, corresponding to 194 million subscribers. In the fixed market an aggregate of 461 operators are currently in the market offering public voice telephony for long-distance calls (up 89% on 1999), 468 for international calls (up 67%) and 388 for local calls (up 74%).

Tariffs continue to move downwards, as do prices for leased lines and interconnection charges. A number of specific matters still need to be addressed, in particular from the consumers' viewpoint. Nonetheless the main regulatory conclusion from the present situation is that current levels of implementation of the regulatory framework form a solid basis for the continued roll-out of the European electronic communications services industry and the wider objectives of eEurope. Strong and empowered national regulatory authorities (NRAs) will continue to play a central role in the transition to the revised regulatory framework, and for this purpose they must be supported with the necessary human and financial resources.

The market power of the incumbent operators is still the single most important barrier to market penetration of new entrants, which justifies the intervention of NRAs, who thereby guarantee continuation of sector-specific regulation.

European Internet penetration levels are set to rise through increased broadband access competition, the introduction of 3G and lower leased line prices.

However a number of matters remain to be addressed: license procedures; tariff rebalancing and supervision of cost accounting systems; provision of local access services; obtaining rapid and equitable interconnection; call termination tariffs in mobile networks; timely delivery of leased lines; roll-out of ADSL and monitoring of issues that affect consumers.


B. The situation of Portugal in the overall market

The overview of the regulatory situation within the EU territory in general and in the 15 Member States in particular, covers the various aspects covered by the current regulatory framework, as follows:

· National Regulatory Authority and Appeals - including the challenges faced by NRAs and the extent of their independence. Emphasis should be placed on the increasing number of complaints by consumers and requests for conflict resolution, as well as the need to adjust NRAs to the phenomenon of the convergence of the telecommunications and audiovisual sectors, without prejudice to the need to maintain the independence of such authorities. Other general regulatory issues include the price of access to mobile networks and flat-rate tariffs for Internet access.
· Licensing - covering the different types of license, associated procedures, response times and applicable taxes.
· Interconnection - including the obligations falling upon operators with significant market power (SMP), the interconnection reference offers (RIO) and corresponding agreements, intervention of NRAs, interconnection charges guided by application of the principle of cost orientation in both the fixed and mobile networks, and the cost accounting systems of the operators with SMP.
· Competition at the level of local access - including the fixed infrastructure, wireless access and the cable television network.
· Universal Service and Consumer Issues - covering obligations related to the provision of a minimum set of services at affordable prices, such as a universal telephone directory, and cost sharing across other market players. In this regard, the compensation fund has only been activated in Italy and France, and the net cost identified for the universal service was fairly negligible. Other issues include the manner in which key consumer issues are handled (service quality, billing, tariffs, conflict resolution), for which a general lack of co-ordination is identified between NRAs and other entities responsible for upholding consumer rights.
· Mobile Services - covering the prices used for international roaming, which the Commission is presently investigating, and the licensing of 3rd generation operators (including roaming between 2nd and 3rd generation systems) and the approaches that have been adopted in relation to the licensing of television operators and operators of terrestrial television transmission networks.
· Tariffs - including analysis of restrictions in terms of tariff rebalancing, application of the principle of cost orientation for operators with SMP and the current universal service scenarios.
· Cost Accounting - covers analysis of the cost accounting systems used and the corresponding auditing models.
· Leased Lines - cost orientation for leased line prices continues to be a key concern, in particular in terms of the provision of Internet services, and is therefore a central issue in the analysis undertaken.
· Numbering - including call-to-call selection, pre-selection, number portability, publication of numbering plans and the implantation of the 112 emergency number.
· Rights of Way - an area where several general problems persist.
· Data Protection - The EU Directive on Telecommunications Data Protection has been substantially transposed.
· Internet - there is significant growth of the Internet services market, and general analysis is now underway of 'flat-fee' packages.